[spikengineer]

I don't agree with your interpretation on this being a stealth tactic but even if this was one it's just the state institutions acting in the interest of their mandate. This might not be beneficial to you employer or Visa or MasterCard or few high flying credit card users of the super rich class but it is in the interest of the people.

If they think it's time to move beyond cards due to the strategic overdependence on foreign service providers like Visa who can disrupt the Indian financial system at the behest of their US govt or other interests it's the right thing to discourage them directly or indirectly.

Think in the interest of the people. WTO commitments are not worth the paper they are written on. State should do the right thing to benefit the people as a whole not worry about inconvenience to a few people or few middle men or foreign companies.

[niyaven]

Ah maybe my comment is not clear, I am not judging on whether this is a good/bad move for people. I wanted to explain that the card number will still be stored: it only applies to recurring payment (at least for now). So for anyone worried about entities storing the card number... this will continue.

I understand the confusion, but just to clarify I'm a big fan of UPI :).

Now, is it good move for the people? It's a complex topic, one could write a lot about it. This move will push people away from cards because card tokenization won't be supported for a while, making recurring payment harder. It's well known that very small amounts of friction can drastically reduce the conversion rate. Entering the card details every time is a hassle for sure.

So more UPI payments. But today there are no MDR for UPI transactions, meaning fintechs and banks are losing money when they process these transactions. For banks, it's supposed to be ok because a digital transaction is cheaper than a physical one. For fintechs, this is tough, you need to find money somewhere else. So less money = less incentives = less innovation. However there have been talks to put back some fees on UPI (banks are pushing a lot on this).

On the other hand, more card payments = higher MDRs. So merchants or customers, or both, will pay more to process the transactions. Banks and fintech get more money. But with a lack of competition, because of the current duopoly (Visa/Mastercard), and the difficulty to enter the market due to strict regulation, innovation is far from its peak. Just by looking at how long 3DS2 takes to roll out you can see that there is a lot inertia.

It's not black and white, as often. Personally I think UPI is a better direction. The only downside is that's it is only for domestic payment. I'd love to see an EU initiative as successful as UPI: instant payment could be the EU equivalent but the fees are crazily high in some countries.

[spikengineer]

MDR problem can be solved as you indicated. It also needs a solution pretty soon too.

EU and developed countries' banks live and finance their profits on fees as they don't make much or any money on loans and other traditional financial tools. Those fees aren't going to go away.

[kranner]

> If they think it's time to move beyond cards due to the strategic overdependence on foreign service providers like Visa who can disrupt the Indian financial system at the behest of their US govt

Is there any evidence that the RBI actually thinks this? You seemingly criticise GP on their inference of an ulterior motive but then posit your own ulterior motive.

[spikengineer]

Yes, some basis exists for such assumptions. RuPay and UPI were originally conceptualised by RBI and Govt of India to solve the overdependence problem. Otherwise RBI and GoI had no reason to introduce RuPay and they could have let the market develop organically.

Recent RBI moves of data localisation and enforcement actions against Diners, American Express and Mastercard also indicate strong intent.

[kranner]

I'm talking about your statement of "disrupt[ing] the Indian financial system at the behest of their US govt".

It's a pretty strong claim. If you have any evidence for this, please share it here.

[spikengineer]

It's a potential situation India is always worried about from a strategic aspect. India is neither strategically aligned to the US nor against it. Historically US strongly supported India's enemies and actively worked against India's interests all the way from 1945 to mid-2000's. US under various administration even threatened attack or sanctions when things don't go their way.

Current day:

Right now in 2021, US is threatening sanctions under a US law called CAATSA just because India bought a few missiles from Russia which is a long standing defence supplier to India. I know that CAATSA is forced on Biden and Trump by US Congress but it doesn't matter to India whether the US executive is doing it intentionally or not, the US state is threatening sanctions over CAATSA. In this era, when India is actively fighting/hindering Chinese agression on it's borders and taking actual casualties where acting against China is also in US interests, US threatens economic sanctions against Indian institutions and companies just because they bought a few surface to air missiles which they think are the most economical option to deter Chinese attack.

US Treasury calls India a currency manipulator and threatens to cutoff India from the USD financial system (as per US appropriation acts enacted to target China) although economists call such a designation as stupid when used against low per capita income developing countries with a current account deficit just because India tries to prevent an exchange rate blowout that could lead to many millions of Indians falling below the poverty line or losing line of income.

Historical:

In 1999, Clinton threatened to summarily sanction India on all fronts including financial when India threatened to go beyond the de-facto border to restrain Pakistan forces after they occupied Indian territory in Kargil. This threat repeated in 2002 after they supported the Pakistani position after Pakistan sponsored terrorists attacked the Indian parliament and India threatened to retaliate against Pakistan.

Every time Pakistan does something stupid against India, US intervenes and threatens to sanction India under the vacuous argument that they want to prevent a "nuclear armageddon". It's not in india's interests to succumb to such threats when they aren't the source of the problem.

In 1998, when India tested it's nukes for the 2nd time, Clinton placed a breadth of sanctions on India because US doesn't like nuclear proliferation although India had nukes sinces 1974 and everyone knew pak had since the mid-1980's and US turned a blind eye although it knew that China, Pak and North Korea are working together on them. US wants so called strategic balance between India and Pakistan and actively supports Pakistan on many issues. This prevents India from deterring China as it has spend resources countering Pakistan which itself is propped up by US Military and economic aid.

In 1971, Nixon threatened to nuke India if India doesn't withdraw from current day Bangladesh when India intervened to stop a Pakistan Army led genocide and the resulting refugee crisis. Nixon didn't follow through because India convinced USSR to provide a similar counter threat.

What happens to an economy if 100% of retail electronic transactions stop overnight?

It is not in India's sovereign interest to let foreign companies control any significant chunk of the financial sector and it's especially not acceptable if they are US companies because US frequently uses this leverage of threat of sanctions to get it's way against Indian ineterests.